Financial Services Industry Archive

Citi reaches deal with U.S. — After days of intense negotiating, the U.S. government has reached a deal to exchange $25 billion in emergency bailout money for a 36 percent equity stake in Citigroup. Shareholders will see their ownership shrink to 26 percent and dividends on common shares are being eliminated. So far, Citi has received $45 billion in federal bailout money but no new...

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The current woes of American International Group (AIG) are a reminder of that football coach’s advice: “Cheer up, ‘cause there’s no hope.” The old coach was telling his boys to play without fear of losing, because they weren’t going to win anyway.  That’s the position the world’s largest insurer finds itself in right now. Leaks in the press say...

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Hailed as a brilliant move in September, Bank of America’s purchase of Merrill Lynch is now widely regarded as a debacle. Yet the initial reasoning behind the deal remains intact despite the challenges. Bad news came from several fronts in the past week or so.  Merrill reported a larger than expected loss for the fourth quarter and revealed financial-reporting weaknesses that caused it...

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Banks will soon start receiving more funds from the government after regulators conduct new stress tests, but they’ll also have to pay higher insurance premiums to the FDIC so it can be ready for future bank failures. Speaking at a Foreign Policy Association dinner last night in New York, FDIC chairman Sheila Bair said that the FDIC is going to increase premiums banks pay to build up...

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Did flawed changes to Chapter 11 bankruptcy laws make it harder to companies to reorganize and survive? That will be the topic of a hearing next week by the House Subcommittee on Commercial and Administrative Law titled “Circuit City unplugged: Why did Chapter 11 fail to save 34,000 jobs?” Circuit City, the nation’s second largest electronics and a one-time innovator of Big...

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Who will fail the “stress test?” Good question. The Obama administration will soon be checking a number of the country’s largest banks which have received some of the $700 billion federal bailout money. The feds want to know whether the banks have sufficient capital and enough different types to sustain any more economic blasts. Another goal is to assess whether the banks can...

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News that American International Group may report up to a $60 billion loss in the fourth quarter — and is seeking still more government bailout money – could be the tipping point in getting its assets sold. AIG is holding the biggest yard sale in history. It had $1 trillion in assets pre-recession, and nearly everything is for sale except its property insurance company, according to...

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One of the scariest things about the financial meltdown is how evaluating risk has changed dramatically. Federal regulators allowed banks to greatly increase their loan to asset ratios. And all sorts of higher mathematics equations popped up that seemed to justify trading in murky derivatives in ways not considered before. Portfolio financial blogger Felix Salmon has an intriguing tale in Wired...

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Bank “stress tests” due – President Barack Obama, scheduled to address Congress and the nation on the matter tonight, will push for stress tests later this week to check the health of 20 of the country’s largest banks. Obama’s aim is to identify future loan problems and dispel a cloud over the banks’ stock values. [Source: Bloomberg] Washington gears up for...

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With talk of Citigroup’s possible nationalization still swirling, it’s worth studying other such experiences. In an earlier blog, I looked at Sweden’s experience at financial rescue and bank nationalization in the late 1980s and early 1990s, with help from a paper written by the Cleveland Federal Reserve. Now it’s Japan’s turn and it is a story more of serious...

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